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How to Choose the Right Sorter for your Material Handling Automation System

June 30, 2015

By Cris AndersonHow to Choose the Right Sorter for your Material Handling Automation System
Project Consultant, Tompkins International

Sorters are commonly used elements in many material handling automation systems. A sorter is basically a device that can receive inputs (usually products, in single unit or full case form) in any order and separate it into multiple, discrete channels without human intervention. The main function of a sorter is to allow the decision of what products belong together in one order to be completed without depending on people. Instead, we will need to use a warehouse management system (WMS) to know all the products that need to go into an order and a collection of machinery to automate the movement of those products. The machines need to be able to read which product it is receiving and to physically move the correct product to the correct area, together with other products that belong to the same order.

Sortation systems are most often used toward the end of the order selection and build process. This way, pickers/product selectors in the warehouse or distribution center can select many products at once, for many orders, also known as batch picking, without separating the products manually. This increases human picker efficiency as it maximizes the amount of product that can be selected in one trip without requiring the person to count out product for each order, or return to the same warehouse location multiple times for each order.

Selecting which sortation system best fits your need requires evaluating several factors. Some things to consider are:

  • What is to be conveyed and sorted? Cases? Totes? Units?
  • Which sortation system will be able to handle the product throughput? (i.e. How many units per hour are flowing through it?)
  • What kind of space is available for the sorter and order build area and how does that impact the design of thesortation?
    • What is the required angle of the divert? 30, 45, or 90 degree transfer?
    • Is sortation limited to a single side, or is a two-sided divert required?
  • Are the products in a format that can be handled by the selected sortation system? (I.e. cases, poly bags, units, etc.)

There are many types of sorters to choose from, including:

  • Shoe sorters: Movable pucks, called shoes, slide perpendicular to the conveyor and travel to certain points to gently move the products to the designated area. These are suitable for many product types because they push gently and consistently.
  • Narrow belt: Narrow conveyor belts move the product through the sorter, while rollers positioned at exits pop-up underneath the products to move them off the sorter path at the right time. These are suited for cases or totes that have a hard, flat bottom.
  • Pop up roller: Rollers move up from underneath conveyor to divert the product off of the main conveyor and on to other conveyors or gravity flow lanes. Similar to narrow belt sorters, these need products to have hard, flat bottoms for best results.
  • Tilt tray: Trays move around a circular or oval track and tilt sideways at the right moment to drop the product down a chute when it comes to the right lane. These can be run at high speed and can also handle a variety of product shapes and sizes.
  • Bomb bay: Similar to a tilt tray in that it product is placed onto a tray that moves in a circular track. This tray is split into two pieces down the middle, and when the product arrives at the correct location; both sides tilt inward and drop the product to the correct location. This must be used with product that can handle dropping.
  • Cross belt: Another type of sorter that moves along a track as one product is placed onto sections of a conveyor belt that run perpendicular to the forward movement around the track. The conveyor belt activates at the right time and moves the product off of the sorter. This has more flexibility than bomb bay and can handle heavier products.
  • Hanging Garment Sorter: This moves product, usually garments, that are hanging from hooks off of the main transport lane to either gravity down lanes or other hanging garment conveyor sections as needed.

While sorters can increase efficiency in many warehouses, each application needs to be carefully considered and designed to work with the rest of the material handling automation system. In addition to carefully evaluating the engineering requirements of the sortation system, the overall business requirements for each situation need to be considered, including capital expense, future maintenance costs, and future growth requirements.

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Why Retailers Need To Be Using Multiple Channels

June 25, 2015

By Jim TompkinsWhy Retailers Need To Be Using Multiple Channels
CEO, Tompkins International

Last week I read multiple articles regarding the closing of brick and mortar store locations throughout the US. The titles of a few articles stated “Hope” and “Dying Slowly”.  I found these words to be interesting and puzzling in regards to plans for closing one-fourth of a retailer’s brick and mortar store locations. Is there really “Hope” when closing such a large amount of locations? Is this really “Dying Slowly”?

I do not believe “Hope” is a strategy. You cannot hope that closing brick and mortar locations will bring profitability. In 2012, 56% of retailers offered a mobile application for smartphones, according to a study by Crossview. This makes it clear that the importance of multichannel retail has been in place for some years now. Retailers need to adapt to what is happening now – omnichannel. As I have predicted, e-commerce has taken a huge toll on brick and mortar stores and retailers need to adjust their supply chain. A supply chain now must accommodate the need to be omnichannel retail, omnichannel logistics, and omnichannel delivery.

I also do not believe “Dying Slowly” is correct; this is a fast death. This is not current news. I stated in my video “The Alibaba Effect” a year ago that this was coming. These times are tough, there are new complexities, challenges, and difficulties to address. “The future isn’t what it used to be,” Yogi Berra famously said. Retail is at a crossroads. In order to be profitable a company must sell through multiple channels, not just brick and mortar. A company needs to have the right strategy, right technology and right supply chain structure. A properly designed supply chain will increase capabilities, focus on target customers, create value proposition for product offerings and services, along with maximizing the economic value.

Omnichannel retail is a multichannel approach to retail that provides the customer with a seamless shopping experience. Whether the customer is shopping online from a computer or mobile device, or in a brick and mortar store, seamless inventory visibility and seamless continuous improvement must be present. Omnichannel logistics is a multichannel approach to network planning, combined distribution centers/fulfillment centers/returns centers/liquidation centers, and lean facilities planning.

The Alibaba Effect and e-commerce are fast moving trains and retailers need to jump on board or die.

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Dimensional Weight Pricing – Shoplifting VS. Highway Robbery

June 16, 2015

By Chris Ferrell dimensional weight pricing
Principal, Tompkins International

According to the National Association for Shoplifting Prevention there are approximately $13.0 billion of merchandise shoplifted each year in the United States. Perhaps surprisingly, it is estimated that almost 85% of goods shoplifted are stolen by employees; leaving only 15.2% — about $2.0 billion – worth of goods which are stolen out of stores by customers.

Both numbers are undeniably large.  Retailers and consumer products manufacturers have gone to great lengths to keep these numbers in check. For smaller items, one of the more tried-and-true means of limiting shoplifting has been through the liberal use of extra packaging material. It only makes sense: a big package is more difficult to steal than a small one.  The bigger item has the added benefit of increased gravitas on the shelf, a consumer is more likely to notice – and presumably consider purchasing – an item in a larger package. Among the most popular – and presumably effective – form of oversized packaging used as a theft-deterrent for Consumer Packaged Goods  (CPG) items is the ubiquitous “clamshell pack”, the clear plastic packaging that is almost impossible to open without a knife or scissors.

Clamshell technology first rose to prominence in the 1990’s as a shoplifting deterrent forCDs and PC software. During this time ordering from home involved looking through a (paper) catalog and then talking to someone on the phone; a selling channel that was a small niche for all but a few retailers specialized in the area. I mention these outdated products and methodologies for a reason: the packaging is still commonly used even though the items people buy and the way that they shop have almost certainly changed. This makes sense because the extra packaging is still an excellent shoplifting deterrent / eye-catcher… and until recently there was not any substantial financial reason to make a change.

Change took place at the beginning of 2015, when UPS and FedEx each decided to subject all U.S. ground parcel shipments to a Dimensional Weight (DIM Weight) calculation in addition to the traditional weight-based system, charging the higher of the two. In short, all of that extra packaging now has a cost beyond the additional raw materials. The first financial results since DIM pricing started have been released by UPS and FedEx. While pure numbers are hard to come by, it appears that the two publicly-traded behemoths are on pace for a combined revenue increase of $2.7 billion in the U.S. domestic ground service sector. Even after factoring out a substantial General Rate Increase (GRI) of 4.9% that both UPS and FedEx took on top of the other changes, it still leaves approximately $2.0 billion in extra freight charges directly attributable to DIM. This “highway robbery” is actually the necessary response for all industries due to the explosive growth of online shopping and home-delivery services; the parcel providers need to be able to charge for the space being used.

But this means consumer products manufacturers and retailers (and, potentially, their customers) are paying about $2.0 billion more in freight, on top of untold billions in additional packaging materials, to minimize the chance of shoplifting and enhance the shelf presence of a product that will never actually be on a store shelf.

While the idea of making changes that have the potential to increase shoplifting might seem unpalatable, when weighed against the certainty of increased shipping charges caused by DIM pricing, it could still be the financially prudent thing to do.

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What Do World Currency Changes Mean to Logistics Providers?

June 8, 2015

By Valerie BonebrakeWhat Do World Currency Changes Mean to Logistics Providers?
Senior Vice President,Tompkins International

In the past year, the US Dollar, the Euro, the Pound, the Canadian Dollar, and the Peso, to name a few, have had significant fluctuations across the board. As of this writing the dollar is up 32% against the Euro, roughly half of that against the Pound and others mentioned. So what does this mean to the logistics companies in these regions?

  1. This creates an increase in North American imports and weaker export activity. European companies gain in selling products into North America.  This means more air and sea freight on Europe-North America lanes, cross border feeds from Mexico and Canada, and increases in domestic North American transportation and warehousing for imported products.
  2. Intermodal rail will continue to grow in North America and put pressure on an already crowded rail system. Transloading at the ports and trucking will continue to face high demand, making it even harder to move products through United States ports.
  3. European based providers will experience more regional volumes in road transport from within Europe and to the East on the continent.

The dollar’s growing strength is predicted to continue to parity with the Euro over the course of this year. This continues to give American businesses and consumers a stronger buying power. This leads to expectations that consumer spending will increase. This will further drive higher demand on services for delivery of goods imported from Europe.

Companies providing ecommerce fulfillment services will be under pressure to meet the ongoing demand for fast and accurate delivery. Increased demands often drive needed improvements in Distribution and Fulfillment Centers to achieve the highest service levels.

Therefore, world currency changes do affect logistics providers.

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Are You Truly Minimizing Your Total Freight Spend?

June 3, 2015

By Gene TyndallFreight Spend
Executive Vice President, Tompkins International

There is no scarcity of information available on the practices of Transportation Management (TM) and Transportation Management Systems (TMS) along with their features and functions. The apparent purpose of all the information is to help companies (whether shippers or service providers) do better at managing their transportation (freight) expenses.

The available information on TMS is designed to help compare the over 30 systems on the market today. The standard process for carrying out this comparison is to first, develop the business (or user) requirements. Then, issue either Requests for Information (RFI) or move straight to the Request for Proposals (RFP). The company must reach a consensus decision on the preferred system or application.

Unfortunately, we too often find that this standard process misses the mark. Typically, either the business requirements have been understated or misrepresented or the comparative assessment results in a choice that is not the best match for the company. No matter how disciplined the processes and business rules that surround the TMS are it fails to deliver the true optimal spend of total transportation funds. This is only recognized when the time is taken to validate the plans vs. actual or conduct a pilot audit of “what could have been”.

Admittedly, requirements change, talent is eroded, or business needs are varied beyond what might have been predicted. We discover several factors in a TM Assessment — these as well as others. Nevertheless, when the business requirements are flawed or the TMS is incapable of adjusting to changes, it is almost inevitable that important gaps will exist in planning and managing a Transportation Management Process.

Let’s first consider the definition of a “TMS”. There are numerous systems or applications available that are labeled “TMS”. These include specialized systems such as; for brokerage, for International, for bulk, for parcels, and other specialized needs. Systems designed specifically for 3PL’s and systems designed specifically for shippers including for private fleets.   The true “TMS” does much more than handle shipments. Just as with other supply chain systems there are “Tiers” that differentiate the basics — shipment handling – from the most advanced – true total freight cost minimization with substantial features and functions in between.

One of the most critical factors for under-performance is the lack of the overall goal of achieving total freight optimization. Planning individual shipments and booking carriers to deliver at least cost is the standard capability of the average TMS. Even the best TMS may not be focused on truly optimizing the total freight spend. This is most often due to: (1) treating each shipment as an individual move only (2) focusing too much on freight rates and not on total delivered costs or (3) inadequate use of the TMS as a plan and not just as a one-by-one shipment transaction tool.

Moreover, not all TMS include modern algorithms for optimizing total spend. Transportation has become a complex process which includes multiple options thus, related issues. Operational options such as cross-docking, multi-modal choices, load building, consolidations, dynamic routing, and mixed parcel/LTL movements are all examples of what must be built into the TMS for it to reflect accurate realities. Charges for accessorials, dimensional pricing schemes, contract vs. spot rates, size and weight packaging, hazardous materials, etc., are further examples.

Minimizing the particular cost of 100 individual shipments does not achieve total optimized freight spend. The many options available and pricing complexities make this business objective more challenging than ever.

Even further, as TMS move to the cloud and away from traditional on-premise delivery models, while this provides for faster deployments and lower up front investments, many users are not taking the time to think about future plans, TO-BE Visions, or innovations. Simply improving on-time delivery, reducing individual shipment costs, and enhancing visibility does not assure the minimization of total freight spend.

In many cases companies have outsourced TM to service providers assuming this method is preferable in resources, time, costs, and energy. Yet, one of the top three complaints with outsourcing year after year is that there is no gained innovation, consideration of new ways to do business, or actual achieved true total freight cost minimization. Reducing the costs of service providers by itself will not result in innovation or leading practices any more than will selecting the least expensive TMS.

What is needed for total freight cost minimization vs. just achieving the lowest cost of each individual shipment? Consider the following questions as you think about your total freight expense:

  • Routing and scheduling: are you certain these are being done well every day?
  • Integration with your WMS: how tightly is this connection such that load building is optimal and multi-stops are planned effectively?
  • Consolidations and load-building: is order integrity being maintained while deliveries are being consolidated or is consolidation even considered?
  • Omni-channel customer satisfaction: are each of your customers pleased with their service and deliveries?
  • Freight expense linked to the financials: is the process integrated to the general ledger and the financial budgets such that order management and shipment planning practices are being adhered to?
  • Increasingly complex networks: as the company re-designs its networks to better serve with DC’s, FC’s, Cross-Docks, Hubs, etc., are transportation plans re-done to achieve lowest costs?
  • Dynamic pooling: are your freight pooling points updated regularly to achieve minimum costs?
  • Backhauls and dynamic routing: are you assured that your total costs are being reduced by smart routings and your carriers are taking advantage of backhauls to reduce your charges?
  • Horizontal collaboration: are you taking advantage of possible load sharing on major lanes?
  • Total cost management: do you examine your total freight expense regularly to evaluate its accuracies as well as use freight management dashboards to identify opportunities?

There are other important questions to be asked as well in managing total freight expense. Without the right TMS in place and it being used properly these are challenging to answer. Yet, we know that companies are too often spending more on freight than necessary. This is due to limited knowledge, tools, visibility, business processes and practices, and restrictive business rules.

The smart evaluation, selection, and execution of the right TMS for the company’s true needs and opportunities has progressed beyond the standard process of defining today’s user requirements and projected shipment volumes. Too many options exist for improving freight moves and too many complexities exist in changing logistics networks. Only a few TMS have the capabilities to plan and execute shipments considering all the options and total costs.

In summary, we recommend all shippers and service providers take a fresh look at their overall freight spend. Apply relevant benchmarks for the various modes used. Examine the processes and practices used to manage not only individual shipments but the overall spend. Evaluate the system being used to support freight management or the need for one. Define the barriers that exist – cultural, organizational, and other – that limit the ability to achieve total cost minimization. Design a roadmap to move forward. Substantial cost savings are almost always there even while not sacrificing any customer service levels.

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How Today’s E-commerce Requires the Evolution to NEXT

May 26, 2015

By Jim Tompkins
CEO, Tompkins InternationalHow Today’s E-commerce Requires the Evolution to NEXT

Retailers need to adapt to next and next and then to next. As I have predicted, e-commerce has taken a huge toll on brick & mortar stores and retailers need to adjust their supply chain. A supply chain now must accommodate the need to be omnichannel retail, omnichannel logistics, and omnichannel delivery.

Some of the retailers that are being affected by e-commerce this year are:

Retailer Brick & Mortar Store Location Closings
Abercrombie & Fitch 180
Barnes & Noble 223
Children’s Place 200
Dollar Tree/Family Dollar 340
Fresh & Easy Grocery Stores 50
JC Penney 40
Office Depot/Office Max 400
Pier One 100
Radio Shack 1,784
Sears 77
Walgreen’s 200
Wet Seal 338


These have not and will not be the only retailers affected by the changing marketplace. Some of the globe e-commerce titans include; Alibaba, Amazon, Apple, eBay, Finish Line, Google,, Lyft, Otto, Rakuten, Tesco, Uber, and Walmart. These titans have been able to adapt to the new omnichannel world of retail and have recognized the importance of moving onto Next. Because of this recognition they have been able to grow, transform, innovate, and be on the offense.

Omnichannel retail is a multichannel approach to retail that provides the customer with a seamless shopping experience whether the customer is shopping online from a computer or mobile device, or in a brick and mortar store, seamless inventory visibility and seamless continuous improvement. Omnichannel logistics is a multichannel approach to network planning, combined distribution centers/fulfillment centers/returns centers/liquidation centers and lean facilities planning. Omnichannel delivery is a multichannel approach of selecting the most efficient and effective mode and carrier for multichannel transportation while addressing the personalization expectations of each individual channel/customer.

It is clear e-commerce is changing retail, consumer products, and distribution. These changes are having huge impacts throughout the supply chain. Your evolution to omnichannel requires that you move on to Next. And, the rate of change is acceleration. HANG ON TO YOUR HATS!

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Best Practices for Loading Dock Safety

May 21, 2015

By Robert McClain
Senior Consultant, Tompkins InternationalLoading Dock Safety

Docks are the interface to the facility where goods are received and shipped. They are also the point of the warehouse where machine and personnel come in close proximity. They are a place where thousand-pound loads are handled by heavy machines in fast-paced environments.  Dock safety is and should be a part of every operation. A Greenfield or up-fitting an existing facility is an excellent time to address dock safety, but just because you’re in an existing facility doesn’t mean safety cannot be enhanced.

Common dock hazards can include:

  • Truck drive-away –Improperly restrained trucks that pull away if the driver thinks the loading process is complete
  • Trailer creep –Unrestrained trucks that ‘creep’ from the dock door due to the action of fork trucks entering and exiting the trailer
  • Water egress – Spills, wet loads, rain that create slip hazards
  • Clutter – Empty pallets, corrugate, debris that create trip hazards
  • Poor visibility
  • Falling objects

Some of these basic dock accidents can be easily avoided when proper safety measures are considered. These can include:

  • Truck restraints to reduce the hazards created by drive-away and trailer creep
    • Proper restraint type is important. Solutions range from simple wheel chocks to fully automatic trailer restraints. Enhancements to these solutions include wheel chocks with handles and flags to improve visibility and trailer wheel or under-run bar (ICC bar) clamps.
    • Restraint status lights work in conjunction with the restraint to signal the driver and loader of the loading process status.
    • A simple but effective method of preventing truck drive-away is to take the drivers keys when they sign in and hold them for the duration of the loading/unloading process.
  • Dock levelers to bridge the gap between the trailer and loading dock. They also serve to level the height between the surfaces as the height of the trailers changes during the loading/unloading process.
  • Dock seals and canopies prevent water from entering the facility and creating slip hazards.
  • Lighting on the fork truck and dock door to improve visibility of the load and personnel working in the area.
  • Netting on elevated loading conveyors and pedestrian traffic control in the dock area to reduce product damage and personnel injury due to falling objects.
  • General housekeeping – Picking up debris as it occurs, organizing, sweeping, and mopping all helps identify and minimize hazards.

At Tompkins International, we work to ensure that dock safety is a part of every design. However, this emphasis is not limited to the design phase, during planning, or implementation. We are constantly applying our experience in thousands of warehouses in offering advice on how to improve existing facility safety. No one-size-fits-all solution exists because all warehouses are different, but taking advantage of new technology and utilizing sound processes can minimize hazards.


Adopting a Program Management Office in Your Supply Chain Organization

May 1, 2015

By Gene Tyndall project-management-office
Executive Vice President, Tompkins International

Learn more about the importance of the Program Management Office (PMO) as viewed from the Chief Supply Chain Officer (CSCO) level and how it is best organized, staffed, operated, and value-based. I will briefly describe leading practices and provide guidelines for supply chain leaders seeking transformative improvements in their operations.

The standards for the Program Management (PgM) process have evolved over the past 10 years. (Spell this out?) PMI has only within the past few years provided guidelines and certifications for the Program Management Professional (PgMP). The PM role is to manage an individual project, the PgM responsibility is to manage in an integrated and synergistic manner, multiple-related projects (sometimes referred to as the “portfolio of projects”). The PMO sets the common language, establishes the project links, and provides the basis for management decisions.

Just as the PM role is now supported by project management support, the PMO has evolved with the introduction of technology and its ability to enable a more virtual process, and not necessarily within a physical entity. The principles of the PMO have not changed, it remains the preferred process for managing multiple initiatives or projects in an integrated and synergistic manner, and provides the platform for related management decisions.

The use of PMO for supply chain management is also relatively recent in its adoption. A few leading companies undergoing supply chain transformations or adding new important programs have adapted the PMO for managing the multiple-related projects that impact the supply chain processes, practices, and organizations (not only technologies). They have “located” the PMO outside of the IT organization. PMO has been placed at the center of the CSCO level or with another C-level, depending on the scope of the program and the corporate organization.

What you need to understand in order to improve the use of the PMO and how to gain the most value from its effective operations are the following:

  • The Organization of the PMO
  • The Project Manager (PM) vs. the Program Manager (PgM)
  • When the PMO for Supply Chain Programs is Preferred
  • The PMO and Knowledge Management
  • How the PMO Affects Change Management
  • The Tools for the PMO

Following the principles of strong PMO development, organization, planning, and execution, the PMO will add value and the value will be recognized.  The companies that make effective use of the PMO end up being more efficient and reach higher levels of performance. Due to the rate of project success increasing, fewer mistakes or do-overs are necessary, and the program achieves benefits faster and longer.

Each supply chain organization needs to decide for itself whether or not the use of a PMO will add value to its goals and objectives.  Once that decision is made its planning and execution needs to be consistent with any other well defined process.

While these requirements may seem daunting, the value of the PMO can well exceed the effort required. The benefits of time, costs, and quality are possible. This can be achieved by a well-planned and a well-executed PMO.

To better understand the details on how to implement a successful profitable PMO, read our white paper: Program Management Office: Its Objectives, Methods, and Value for Supply Chain Management


Calculating the True Return on Investment on Your Material Handling System – How ROI Calculations are Evolving

April 29, 2015

By Thompson BrockmannCalculating the True Return on Investment on Your Material Handling System
Partner, Tompkins International

We have a long history of focusing on solutions that maximize supply chain performance and value creation. A large part of that is ensuring that recommendations consider both qualitative and quantitative analysis of multiple alternatives that are designed to best meet clients business strategies.

One of the final steps in distribution and fulfillment center material handling design efforts is to determine the return on investment (ROI), a tried and true method of ranking the economic benefits of multiple alternatives. However, translating the results of economic analysis is not as easy as just ranking the key indicators.

More and more, we are seeing today’s leadership looking beyond the simple ROI, Net Present Value (NPV), and Internal Rate of Return (IRR) calculations. Company leadership is more interested in a holistic look at how the economics of the proposed solution impacts the profitability, growth, and success of the company as a whole. Consider these key components of any economic analysis that aren’t always included in a cash flow analysis:

  • Does the age and condition of current equipment put the mission of the business at risk?
  • What are the costs of acquiring and maintaining labor pools?
  • What are the ongoing maintenance costs?
  • What solutions address increased business continuity concerns?
  • What is the impact to EBITDA? How should depreciation of equipment be accounted for in the economic evaluation so that the EBITDA impact is accurate?
  • What are the true costs of not investing? Are all cost avoidances being correctly accounted?
  • Are one-time expenses and operating costs fully captured?
  • Has the strategy been properly developed so that the structure of the material handling system is designed to meet the strategy? What are the costs of not being able to meet the strategy?
  • Will the material handling system enable new distribution channels, product lines, improve customer service, or have other benefits?
  • Are you looking at the correct economic indicators, i.e. should the NPV be given more weight than IRR as it better addresses other opportunities for available capital?

To meet today’s trends in economic evaluations Tompkins International takes a “More Thought, Less Steel” approach to material handling system design. Our designs keep the value of our client’s capital in the forefront of the entire process. Coupled with a focus on strategy first, ensures solutions that are truly geared toward maximizing value creation within the supply chain.

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The Importance of a Customer Driven Supply Chain Strategy

April 22, 2015

The Customer Is Always RightCustomer-Driven Supply Chain

By Jim Tompkins
CEO, Tompkins International

Customer expectations are not consistent with what companies offer. Therefore, the companies supply chains are not allowing the fulfillment of the customers’ expectations. Wow, what an opening to this message! Are these first two sentences true? Am I just trying to get your attention? How could these first two sentences be true, as it appears I am saying that no company has set customer satisfaction standards that meet customer expectations. I admit to playing with the way I stated the first two sentences to get your attention, but the first two sentences are true, once you understand IWI WWIWI (I Want It, When and Where I Want It).

Customers’ expectations are not being met because company supply chains are not properly designed to meet these expectations in a way affordable for the company. Companies need to ask what the customers’ expectations are. Customers should be MAKING THE DECISION regarding their delivery expectations, not the company. The days of telling customers what to expect are behind us and what we now are hearing customers say is IWI WWIWI. The customers’ expectations are that your supply chain be personalized to their personal expectations. How are you going to design a supply chain that responds to all customer needs? Envision your model is to offer free shipping to major cities in one day, smaller cities in two days and to rural areas in three days. How do you reasonably deal with a customer who wants two day delivery in a rural area? The key here is not what decision is made but rather who is MAKING THE DECISION. The challenge for the company, then, is to provide the customer with enough information to make the decision that meets their expectations. The IWI WWIWI becomes IWI WWIWI OYTMTP (I Want It, When and Where I Want It, Once You Tell Me The Price). The company must be able to have a supply chain that can respond to the customer who has now MADE THE DECISION. Companies need to realize the customer is the one MAKING THE DECISION. The company’s job is too reasonably and with total transparency present the pricing to the customers so that they can MAKE THE DECISION based on their expectations. Back to the example: of the customer who wants to have two day deliver to a rural area.

I suggest an automated response similar to:

Dear Customer:

Your purchase does not meet our standard free two day shipping requirement due to your location in Statesville, NC. It is very important that we here at meet your expectations, so allow me to offer you the following options:

  1. Standard: If we do not hear back from you by 3PM on the day of purchase, we will ship you the two items you selected via our standard free 3 day shipping option.
  2. Pick Up: If you tell us by 3PM on the day of purchase that you can pick up your two item order in Winston Salem, NC or Hickory, NC on Thursday or Friday (click the city to get directions), we can have your order available for pick up at no additional charge in two days as requested.
  3. Two Day Delivery: If we hear back from you on the day of purchase by 3PM, we will expedite your two items selected for two day deliver and charge your credit card an additional $7.95.
  4. $100 Order: Currently your order total is $37.25. If you add an additional $62.75 to your purchase by 3PM on the day of your original purchase, we will expedite your entire order and have your order to you in two days with no additional shipping fees to you.

If you decide on the Pick Up option, the Two Day Delivery option or the $100 Order option please respond to me via email.

Thank you for shopping with us and helping us understand how to best meet your expectations. If we do not hear from you by 3PM on the day of purchase we will have your order to you within three days with our standard free shipping. Our goal is to provide you the service you desire.

Alan Smith
Vice President of Personalized Customer Service

This is IWI WWIWI OYTMTP and why companies need to provide their customers the option of MAKING THE DECISION with respect to their expectations. Also, understanding the need to design the supply chain to enable the fulfillment of the customers personalized expectations. Offering customers the opportunity to personalize their customer service expectations and designing your supply chain to meet these personalized expectations will not only result in happy customers but also happy shareholders. Companies will not only be satisfying the customers’ expectations, but they will also avoid incurring unnecessary costs to the company.

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Are You Certain Your Supply Chains Are Demand-Driven?

April 16, 2015

By Gene Tyndallsupply chain
Executive Vice President, Tompkins International

It is difficult to come across many supply chain leaders today who do not subscribe to the principle of Demand-Driven Supply Chains. As supply chain experts we continue to write about, provide webinars, present at conferences, and assist numerous client companies to progress towards the Demand-Driven Supply Chain model. Software suppliers have promoted and developed software to help enable the Demand-Driven Supply Chain model. Business sense tells us that we want to sell what we make, or buy; we want to carry in available stock and we want to keep our supply chains operating at minimum costs and maximum speed to provide these goods to the customer.

It is difficult to come across many supply chain leaders who are satisfied that their supply chains are operating under optimum demand-driven indicators. Even the best supply chain companies (for example: the Gartner top 25) have supply chain leaders who are dissatisfied or uncomfortable with their supply chain performance in the role of demand-driven principles and objectives.

What is it that is holding back Demand-Driven Supply Chains? Why can’t the best supply chain leaders achieve demand-driven performance goals? Why can’t more supply chain leaders commit to the “demand-driven journey” (as Gartner is now referring to it) and gain corporate support for a Demand-Driven Supply Chains? I believe the five most prevalent reasons are:

First, we know that securing investment budgets for “demand-driven journeys” is a challenge. Today’s business conditions demand “short-term paybacks” for specified projects. Any initiative that requires a “demand-driven journey” is often rejected, unless the roadmap for the “demand-driven journey” includes clear incremental value. The best roadmaps are based on “do now, do next, and do later” projects each with value-based improvements along the way. When certain fundamentals are foundational, however, they often do not make the capital budget filter.

Second, Demand-Driven Supply Chains start with understanding the customer demand patterns, consumer preferences, and “why” a customer will complete a purchase. Errors in sales forecasting receives the attention. Some companies have been working on reducing forecasting errors for years with limited success. New processes, new technologies, new hires, and new practices have all been tried, yet a “single version of the truth” remains elusive. S&OP processes, which most all companies have in place, are too often “stuck” on analyzing forecast errors, such that demand-driven operations cannot gain traction.

Third, we continue to observe demand-driven performance objectives that are simply too basic with targets that are somewhat straightforward to meet. While this approach can be “business correct” and gain some inherent credibility for supply chain leaders, it is not directed at the potential value that Demand-Driven Supply Chain excellence yields. Improving inventory turns by 10%, process cycle times by 5%, supply chain costs by 5%, or order fill rates by 5%, are good but clearly are not seen as significant. These set the bar way too low, and may cause Demand-Driven Supply Chains to be assumed as good. This is not nearly optimal. This creates attitudes of complacency focusing too much attention on transactions and not on the real power of transforming processes.

Fourth, and admittedly a challenge, is to focus on your best customers as well as internally. Often, Demand-Driven Supply Chain improvements can come from collaborative processes such as shared forecasts, shared methodologies, and early alerts on promotions or new product introductions. Years ago it was thought that such collaborations required the retailer, or the supplier, to “get its house in order first”. It has been learned that both parties can improve faster by sharing and collaborating. While P&G/Walmart led that awakening, now over 20 years later, and with much prodding from Gartner (Stage 3 – Integrate to Stage 4 – Collaborate), there is too little Demand-Driven Supply Chain collaboration industry-wide. Gartner estimates only 10% of companies are at this stage.

Fifth, other Initiatives can and should be linked to Demand-Driven Supply Chain goals such as reducing cost-to-serve and supply chain segmentation. While customer satisfaction is often cited as a reason to launch most initiatives, this is rarely defined, measured, or differentiated enough for Demand-Driven Supply Chain operations. Defining the value propositions for why customers will buy a product is critical to the business strategy. All too often, the necessary operations strategy of defining what capabilities are needed to meet those value propositions, whether they be based on cost/price, service, ease of doing business with, service during promotions, availability, speed from order-to-delivery, or return policies are missed.

At Tompkins International, our mantra is “Strategy – Structure – Execution”. Demand-Driven Supply Chains require attention and commitment at every stage of progression and reinvention. Future TO-BE visions need to include lofty goals such as those that Demand-Driven Supply Chains enable then, incremental targets can be adopted to form the roadmap to success.

It is time for all supply chain leaders to better define the value of Demand-Driven Supply Chains. This needs to be communicated to corporate executives, enterprise-wide operations, sales, financial managers, customers, and suppliers. Only then will the “demand-driven journey” really gain traction and become a corporate-wide goal, and thus a supply chain-led transformation that yields important business value.

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The Importance of Optimal Column Spacing

April 9, 2015

 By Wendy JohnsonOptimal Column Spacing
Associate Consultant, Tompkins International

Here at Tompkins, we often work in warehouse design. One of the most common errors in the design of warehousing facilities is to use the building cost criteria to define column spacings. With all of the considerations that go into designing a warehouse, column spacing may seem to be of little importance beyond ensuring the structural integrity of the building, but this is simply not the case. For optimal functionality the clear spacing between columns must be compatible with the storage system design.

Top two Challenges caused by improper column spacing:

  1. Poor space utilization. Generally, columns are spaced apart at 40 feet, 50 feet, or some other similar measurement. Architects and structural engineers habitually use these lengths in designing building configurations because steel mills generally produce structural members in these lengths. Often times, however, these dimensions result in a column line landing in a designated path of travel. Columns cannot be in an aisle and inhibit traffic flow, therefore racking must be relocated further apart in order to hide the column within either the flue or a bay of racking. Aisles that are wider than necessary wastes significant square footage. For example, if 60-foot column spacing is used instead of an optimal 54-foot, the space required would increase by a 10% for the same storage. Given the investment costs of a commercial building, this is not a trivial expense.
  1. Decreased storage locations. In order to avoid having columns landing within the path of travel, racking bays may have to be moved further apart-often times, moving racks several feet wider than is otherwise required. This means that the warehouse will not hold as many racks because more square footage is being taken up with aisle spacing. Further, often times, a column will be placed within a rack instead of in the flue. This means additional locations will be unusable because of the location of the column, which can result in a loss of upto 5% of storage capacity.

Determining optimal column spacing:

Finding the optimal column spacing for a warehouse is fairly straightforward. First you need to determine the depth of rack, flue spacing and aisle width. Once determining these factors, you can use this formula for a single selective storage system:

Optimal Column Spacing


Example of ideal column spacing vs. standard column spacing:

54-foot column spacings allow a 10-foot aisle for 48-inch racking. This same configuration cannot be obtained in a building with 50-foot column spacing and causes a column to land in the path of travel. A building with 60-foot column spacing allows the same number of racking to be obtained at the 54-foot building; however it is inefficient as this used 12-foot aisles instead of 10-foot and therefore wastes otherwise useable square footage.

Other Considerations:

A typical 26-foot clear storage building will require 12-inch heavy wall pipe columns or 12 by 12-inch wide flange beam or box columns. If pallet racks are to be used and three sections of pallet racks are to be placed between each pair of columns, the clear space between the faces of the columns must be 292 inches, or 24 feet 4 inches. A four-unit bay would require 32 feet 4 inches. Placement of six double-pallet-width units requires a clear space of 49 feet 8 inches. Thus, in a typical warehouse design, a 33 by 51-foot center-to-center bay spacing with 1-inch columns would probably accommodate rack storage in either direction and provide optimum flexibility of layout with elimination of column loss.

So, it’s simple: when designing a warehouse, column spacing must be considered in order to achieve optimal functionality. For more information on this topic and others please reach out to us on LinkedIn, Twitter, or in the comments section below.

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Aging Material Handling Equipment Puts Your Distribution/Fullfilment Center at Risk

March 31, 2015

By Bruce TompkinsMaterial Handling Equipment
Partner, Tompkins International

We spend a good deal of time in distribution / fulfillment centers and get a first hand view to how material handling systems are working. Our observations over the last several years are that the equipment components of today’s material handling systems (conveyors, pick to light, sortation etc.) are showing signs of aging.

To get further insights on what we have observed we surveyed a large number of distribution leaders about the state of their material handling systems.  We got the following information from the survey data:

  • The average age of company’s material handling systems was over 15 years.
  • Companies had an average of nearly 3 distribution operations with systems more than 15 years old.
  • 35% of all material handling systems are over 20 years old and having a system over 30 years old was not out of the question.

These results did not totally shock us, but they certainly concerned us. With systems this old the probability for excessive downtime is great and the chance for a complete system failure clearly exists. Depending on the robustness of your distribution network the downtime and failure could cost you significant lost sales, unsatisfied customers and increased operating costs. The failure of your system could put a DC/FC out of commission for an extended period of time.

This is a huge risk to take with potentially a lot at stake. Don’t make the mistake of assuming everything will be fine. Do a detailed assessment of the health of your material handling systems and consider improvements, upgrades and possibly replacements of equipment and controls. Hoping isn’t a good strategy when it comes to critical material handling systems.

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Alibaba and Amazon – The Future of Borderless E-commerce

March 19, 2015

By Michael ZakThe Future of Borderless E-commerce kour
Principal, Tompkins International & Contributor to Forbes

We knew it was coming. We did not know where, when, how, or why. It is official Alibaba, the largest most profitable e-commerce company in the world, and Amazon, the second largest, are now are directly in contact as of March 6, 2015.

Amazon joined Alibaba’s T-Mall platform. More than 60,000 foreign and domestic brands and retailers have stores on T-Mall. Some of the American brands include, Nike, Apple, and Tory Burch and retailers such as Costco.

This marks Amazon’s entry into selling consumer products like apparel, food, and electronics in China through the use of an Alibaba platform. Alibaba is so dominant that approximately 75% of all e-commerce transactions in China utilize an Alibaba business unit.

It appears that Amazon has realized that you must partner with Alibaba in order to successfully compete in the e-commerce world in China. This move allows Amazon to open a major channel in China and a back door to building awareness of and engagement with the Amazon brand. It also allows Amazon to better understand the characteristics of e-commerce in China. At the same time, Alibaba stands to profit from a potentially huge new stream of revenue while not incurring any new capital investment.

We will have to wait to see how this changes the future of Amazon’s business in China and what this means for the future of Alibaba’s business in America. This may be looked back on as a seminal moment in global e-commerce.

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7 Guidelines to Achieving Growth Through Globalization

March 9, 2015

By Jim TompkinsGrowth Through Globalization
CEO, Tompkins International

Global headlines anticipating growth through globalization are plentiful.  Three different positions on achieving growth all point to cross-border e-commerce from a brand, company, and country perspective:

    • Williams-Sonoma and Zara head to Mexico
    • US brands targeting global growth
    • European luxury brands focused on growth in the US
    • Apple and Calvin Klein launch in China
    • eBay expands in Russia
    • Rakuten seeks foothold in the US
    • Alibaba to expand global footprint
    • Amazon to penetrate emerging markets
    • Mall for Africa helps retailers reach Africans who are thirsty for Western goods
    • Key e-commerce emerging markets include: Malaysia, UAE, Thailand, Chile, Peru, Columbia, and South Africa
    • E-commerce focus in North America, UK, Germany, Japan, China, India, and Brazil is intense
    • Canadian online shoppers increasingly buying from US

It is clear that the options are plentiful, but it is also obvious that the challenges are great and headlines of global challenges are abundant. For example:

  1. “Target Canada liquidation sales get green light”
  2. “Best Buy makes final retreat from China”
  3. “Kingfisher Bows from China”
  4. “Carrefour may consider China exit”

So, this is a huge problem as western brands and retailers need growth and, for the most part, do not see this growth coming from the US or Europe. Globalization looks attractive but it is a long shot from a walk in the park.  Being a global supply chain company for over 25 years, Tompkins International has had the benefit of watching the evolution of the global marketplace from the very beginning. We have helped many companies achieve tremendous success on the global stage. We now have many companies coming to us asking for the “magic recipe for achieving growth through globalism.” Let me be real clear:  THERE IS NO MAGIC RECIPE. However, to not leave you in the dark, here are our 7 guidelines to achieving growth through globalization:

  1. AMAZON GUIDELINE: Do not pursue a growth strategy that duplicates something Amazon is already doing well.
  2. ALIBABA GUIDELINE: Do not pursue a growth strategy until you really understand marketplaces and your marketplace path forward.
  3. WALMART GUIDELINE: Do not pursue a growth strategy until you really understand omnichannel retail and your omnichannel path forward.
  4. COMPETITION GUIDELINE: Do not pursue a growth strategy until you really understand your competition and your unique value proposition.
  5. CULTURAL GUIDELINE: Do not pursue a growth strategy until you really understand your target customer and their expectations on Price, Selection, Convenience and Experience.
  6. STRATEGY GUIDELINE: Strategy must always come before structure. The Strategy must come before the growth of your business. Do not shortcut Strategy. (Link to our Strategy before structure White Paper)
  7. EXPERIENCE GUIDELINE: Do not pursue a growth strategy without expert assistance.  Your growth strategy is far too important to pursue without assistance from experts with relevant prior experience.

The global marketplace is full of challenges. Following the guidelines presented above will increase your abilities and capabilities to be successful.

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Consumer Products Insights – Supply Chain Trends

March 6, 2015

By Bruce TompkinsSupply Chain Trends
Partner, Tompkins International

Determining future trends in consumer products or most any industry was not nearly as difficult in the past as it is today. One of the major trends is that industry leaders must be students of major trends. In order to develop good strategies and execute against them, today’s leader needs to know what is happening now and a sense for what is to come.

From a supply chain perspective this can mean many things for a consumer products company:

  • Understanding your current supply chain network and how it needs to evolve.
  • Knowing how to set up and run distribution centers to match consumer needs – e-commerce, m-commerce and omni channel.
  • Working in a global economy with a myriad of supply chain issues and complexity.
  • Managing risks to supply chain interruption from a rapidly increasing number of sources.
  • Staying ahead of the technology learning curve to the extent possible.
  • Developing flexible supply chain strategies to adjust to customers, competitors and other stakeholders.
  • Meeting the needs of a changing workforce.

The challenges for supply chain leaders in consumer product companies are many and far ranging. And while the challenges are large, so, too are the opportunities for improvement and transformation. Consumer products company leaders must understand the world around them and look for applications of best practices for their organizations. I believe being a part of the supply chain of the future is an exciting place to be.


Freight Rates – A Nightmare to Manage?

March 3, 2015

By Tony Nuzio – Guest BloggerFreight Rates - A Nightmare to Manage?
Founder/CEO, ICC Logistics Services, Inc.

In today’s very competitive domestic trucking environment, shippers are being deluged with a variety of pricing options, including varying base rates, varying discounts, numerous accessorial fees and scaled fuel surcharges.  So how does a shipper know if he’s getting a good deal or a bad deal?

The proliferation of individual carrier base rate structures, which vary from carrier to carrier, is the primary reason shippers have a difficult time assessing whether the rates their carriers are charging are the best available rates in the marketplace.  In fact, many carriers use inflated base rates and high discount levels to lure shippers to utilize their services.

The shipper obviously has an obligation to analyze the various motor carrier price offerings to determine which carrier or carriers can provide the best service at the most economical cost.   In one analytical study we recently performed for a shipper client who received bids from five different motor carriers we compared the individual carrier rate structures against a “standard” freight rate structure to see which carriers’ rates actually produced the lowest net freight charges.

The discounts the client received ranged from a low of 70% to a high of 85%.  When we compared the individual rate structures against the “standard” freight rate structure we found the following percentage differences between the “standard” freight rate structure and the individual carrier freight rate structures.

Carrier A              20% higher than the standard base rate

Carrier B              42% higher than the standard base rate

Carrier C              1% higher than the standard base rate

Carrier D              10% higher than the standard base rate

Carrier E               6% lower than the standard base rate

What this analysis clearly pointed out was that the discount offered by the individual motor carriers was meaningless when it came to measuring the net rate the shipper would actually end up paying.

To solve the problem we recommended that the client enter into Transportation Contracts and require their carriers to utilize the standard rate structure as the base rate level for all carriers.  The individual carriers would then discount their rates from the standard base rate level and the shipper would then know which carrier had the most competitive rate for their various shipping lanes.

In addition we recommended that the carrier’s cap their annual General Rate Increase not to exceed 3% and also provided a standard Fuel Surcharge Table that all the carriers would utilize.

It is clear to us that many shippers are being lulled into a false sense of security that discounts which now are in the 80+% range mean that shippers have finally taken control of their domestic motor carrier transportation expenses; this is certainly not the case.  The fact is that many shippers lack the technical expertise to perform these rate analytical studies.  In addition they certainly do not have access to competitive rate structures to make a proper determination as to what rates, discounts and ancillary charges will actually yield the most competitive rates.

Shippers requiring this assistance should seek out help from transportation and logistics consultants to help them perform these very important benchmarking analyses.  The results will pay off handsomely.

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Reprinted from ICC Logistics Services, Inc. with permission.


Retail Sales and the Implication on Real Estate:
Part II

February 26, 2015

Where Retail Sales are Consummated: Part 2 – The Rest of the StoryRetail Sales and the Implication on Real Estate

By Jim Tompkins
CEO, Tompkins International

In part 1 of this 2-part blog, I presented some directional statistics on the growth of retail sales in sophisticated and unsophisticated countries. I also discussed the portion of these sales that are online versus in-store and the real estate implications of these statistics.

I also caution against a false impression that some conclude from looking at both sophisticated and unsophisticated countries over the next 7 years is that in-store sales are more important than online sales. Yes, more sales are done in-store than Online, but this has nothing to do with the importance of one over the other. So, why is this a cautionary note? The cautionary note is required as I cannot tell you how many times I have heard a traditional retail executive’s question:

  • “Why are we spending so much time and effort on the 9% of our sales (online) at the exclusion of the 91% we do in-store?”
  • “Why are we letting the tail (online sales) wag the dog (in-store sales)?”
  • “We make money on in-store sales, but lose money on online, why are we so focused on our online sales?”

The cautionary note and the above 3 questions are missing two major facts:

  1. The title of this two part blog can be interpreted in two different ways. One interpretation is that “Consummate” is about the physical location where the sale was transacted (in-store or online). The other interpretation is that “Consummate” has to do with what was the influencer that begets the sale. The chart below demonstrates the influence exerted by e-commerce on all sales for both sophisticated and unsophisticated countries. In year 2012, 50% of all retail sales in sophisticated countries were influenced by a company’s online presence. This number will pass 60% in 2015 and hit 70% in 2018. Although there is a slower adoption on the rate the influence on total sales for unsophisticated countries, an Influence level on sales of 70% will be achieved by 2018. It is this influence level of e-commerce that is driven by e-commerce search and social referral that is driving the necessity of omnichannel. The reason e-commerce is so important is because of the omnichannel nature of shoppers – Online presence influences the majority of today’s sales in sophisticated countries, and by 2017 it will drive the most sales in unsophisticated countries. This is how you answer the 3 questions above.

E-Commerce's Influence on Retail Sales

The second major fact is also related to omnichannel, but not retail sales. The rate of acquiring new customers can be as low as 5% for “big box/discount oriented” retailers, but as high as 80% for “high-end/personalized service” retailers like Nordstrom or Saks. One of the key attributes of a retailer’s online site is to attract new customers for both online and in-store sales, along with the pursuit of customers for the lifetime value of the customer. To demonstrate, consider a 25-year-old female retailer shopper whose mother and grandmother were totally dedicated to shopping at Nordstrom. In turn, this woman does not shop at Nordstrom because she considers the store as being for “older women.” So, she knows Nordstrom’s, but does not shop there. However, while online she comes across the Nordstrom site and buys a pair of shoes. She loves them and the great service Nordstrom provided. The next time she goes to the mall she decides to just “walk through” the store. Two hours later she leaves Nordstrom with four bags and much to her surprise, she has become a Nordstrom shopper. Are her sales online or in-store? The answer of course is neither, they are omnichannel sales. So, to answer the 3 above questions again: the reason e-commerce is so important is due to the omnichannel shopper. It is your online presence that will attract new customers whose lifetime purchases, both online and in-store, can be huge.

So, Omnichannel retail is about providing the customer a seamless customer experience, both online and in-store. This is how customers desire to shop and how you are going to consummate sales. That is why online is so important to your overall sales strategy and must be a key part of your companies planning. Your organization must embrace omnichannel and the changes this requires in your supply chains for delivery, availability and cost.

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Retail Sales and the Implication on Real Estate: Part I

February 25, 2015

Where Retail Sales are Consummated: Part I

Jim TompkinsRetail Sales and the Implication on Real Estate
CEO, Tompkins International

Recently, Tompkins International completed internal research on correlations between retail and real estate. This research was done in order to give guidance on where retail sales are made and how retail impacts real estate. We primarily analyzed how these factors affect sophisticated and unsophisticated countries differently.

For the purposes of this research, the United States, United Kingdom, France, Germany, and Japan will be the sophisticated countries that we discuss; China, Brazil, Russia, India, and Spain are the unsophisticated countries.

Chart 1 shows the directional evolution of total sales, in-store sales, and online sales for sophisticated countries and Chart 2 shows the same directional evolution for unsophisticated countries. I say “directional” since each country is different and there is a considerable range of projections for each country’s evolution. In fact, I wanted to also include a slide for evolving nations, but the range of projections is so broad that the graphs could not be accurate even given the “directional” qualifier.  So, the point here is to use Chart 1 and 2 to draw overall conclusions, but not to try a quote a specific level of sales.

On Chart 1 for the sophisticated countries, the first thing you note is a greater level of growth in the early years than in the latter years. However, of much greater interest is what happens when you subtract the online sales from the total sales. Yes, in year 2018 the sales taking place in-stores begin to decline.  So, what this tells us from a real estate perspective is that we are going to require less store square footage after year 2018 than before. This number will continue to fall into the future.

Retail Sales and the Implication on Real Estate - Total Sales (Sophisticated)

Chart 1

In sophisticated countries we will be eliminating or repurposing retail square footage. The repurposed retail square footage may become recreational space, restaurants, residential space, or clique-and-collect space, but it will not remain retail stores. Also, Chart 1 shows us the growth of online sales; online sales increase every year on the chart. The impact here is most important to real estate when you face the fact that the amount of space required to do fulfillment of online orders is 3 to 4 times more than the space to do distribution of products to stores. So, the net result with online sales growing while in-store sales are falling is a huge increase in the amount of warehousing space required for distribution/fulfillment. In addition, whereas distribution centers traditionally have been built in rural areas, the new fulfillment centers and combined distribution/fulfillment centers will be built in urban areas.

In Chart 2 we see the same three lines but for unsophisticated countries. First, we note a total sales line that is heading clearly in the northeast direction with no slow down in total sales. Secondly, we see that in 2012 in-store and online are about equal, but in-store sales accelerate faster than online sales. Nevertheless, online sales will climb faster and by 2024, in-store and online sales are essentially equal again. 

Retail Sales and the Implication on Real Estate - Total Sales (Unsophisticated)

Chart 2

Here we see a different real estate picture.  In unsophisticated countries, we are going to need more retail, distribution, and fulfillment space. Since the total sales volumes are growing so rapidly, we are not going to have a lot of distribution space, but we will have too little fulfillment space. Going forward, it will be easier to build combined distribution/fulfillment. However, in sophisticated countries, distribution and retail space is going to need to be converted into fulfillment or combined distribution/fulfillment centers.

There is a major difference in the real estate implications of the evolution of retail business in sophisticated and unsophisticated countries. Sophisticated countries will have less square footage in stores, a big transition towards online fulfillment, and combined distribution/fulfillment centers closer to population centers. For unsophisticated countries there will be a growth in-store square footage and fulfillment and combined distribution/fulfillment centers square footage.  A false impression that some conclude from looking at both sophisticated and unsophisticated countries over the next 7 years is that in-store sales are more important than online sales. Yes, more sales are done in-store than online, but this has nothing to do with the importance of one over the other. To understand why check out my post later this week on “Retail Sales and the Implication on Real Estate: The Rest of the Story.”


Designing for Material Handling Excellence

February 12, 2015

By Jim Tompkinsmaterial handling
CEO, Tompkins International

Tompkins International recently celebrated our 15th year as a Material Handling integration firm. As I reflect on these 15 years and the success of this business dimension, I see some very important lessons that have significantly contributed to our success in designing and implementing material handling systems. Here are the top 3 interrelated lessons that I encourage you to ponder:

  1. Life Cycle Usability: We recently wrote a report based on a survey on the age of material handling systems. We discovered a surprising outcome associated with this survey: most material handling systems are in use 10 years after installation, many are in use 15 years after installation, and some are still operating after more than 20 years. The challenge beyond the challenge of these systems being used beyond their useful life is the fact that these systems are most often designed as a component of a 5 to 7-year strategic master plan. So, the key point to remember when designing a material handling system is to consider how a system designed with a 5-7 year planning horizon is going to operate over a much longer period of time. What we often see here is an operating horizon that is twice, three-times and four-times longer than the planning horizon. You must build maintainability and reliability into the system design so that it can operate over the operational life of the system.
  2. Adaptability: Due to the unprecedented rate of change taking place in business today and the impacts this rate of change has on material handling systems, it is very important that the systems be designed while considering:
    • Modularity: Seasonality, promotions, growth, product life cycles, and ongoing daily volume fluctuations beget the need for our material handling systems to operate over a wide range of capacities.
    • Flexibility: As times evolve, things change. Products get larger and smaller, they get lighter and heavier, etc. Material handling systems must be designed to operate over a wide variety of different products and packages while still operating efficiently, effectively, and safely.
    • Rigidity: While we are designing material handling systems to be modular and flexible, we also need to design these systems so as to reduce rigidity. Rigidity constrains operating performance and can limit the value of the material handling system over time.
  3. Simplification: We often spend as much time improving our designs as we do developing the initial design. The rigorous review of the material handling system design can also cause a significant reduction in the cost of the material handling system. Many material handling equipment suppliers are interested in selling “more steel” so we do not see them rigorously pursuing simplification. Since our goal is to “sell less steel” we invest more thought to assure the lowest cost, highest value, and highest ROI. We strongly believe “More Thought and Less Steel” is the correct design thought process and this only occurs via rigorous simplification.

So, the lessons to be learned are:

  1. The system you are designing will be used well beyond the planning horizon.
  2. The system you are designing will be required to perform across a broad range of operating requirements.
  3. For the system you are designing to be of maximum value, it must be designed with “More Thought and Less Steel.”

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